MarketWatch:
By Mike Whalen
Heavy Vehicle Parts Aftermarket Part Two – Changes in the Truck Parts and Component Aftermarket: Where do you go from here?
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irst let's have a quick review of Part One of Heavy Vehicle Parts Aftermarker. During the 70’s and early eighties I managed a parts business that served the off-highway truck and equipment market segments. The business started as a small filtration distributorship that added other parts specialties that included hydraulic hose, fittings and pre-made hose assemblies plus mufflers and exhaust parts and wear parts for off-road equipment. We concentrated on the HD offroad market segments and stayed away from the on-highway long haul markets. As we grew, we also stayed away from large truck fleet accounts that were the targets of the large parts distributors. Our customers were mixed vocational fleets of purpose-built trucks and off-road equipment serving the construction, forestry, mining and municipal markets. We also made sure the parts groups we carried all had a service component. A major shift has taken place in aftermarket distribution. The original channel for aftermarket service parts was the OE dealer. This moved to a shared aftermarket
– probably around 75% through the OE dealer and 25% from independent distributors. Remember that the OEM dealer, at one point, was the major customer for OEM parts for trucks not represented by the specific dealer performing the service. OE dealers bought service parts for the truck brands they didn’t represent from the independent aftermarket parts distributors. As OE dealers began to be recognized as all-makes parts distributors, the parts manufacturer sold directly to them or through allmakes direct ship, PDC and private brand programs. The OE dealer is now a direct competitor of the independent parts and service distributor. Today we have four categories of parts and service outlets competing for the after-market parts market. 1. The OE dealer with all-makes parts programs. 2. Multi-line parts distributors. 3. General all-makes independent service providers. 4. Specialty parts and service providers. These four groups now dominate the aftermarket. So where does the small independent fit?
Groups Three and Four are readymade for those without the financial strength to fund a multi-line parts distributorship. Those with the expertise needed to service allmakes trucks and off-road machines are perfect candidates for number 3. Number four is the category most suitable for the smaller parts and service specialist. WHAT’S OLD IS NEW AGAIN. As mentioned in part one, my initial foray into the engine powered truck and equipment aftermarket included parts categories that needed service and installation expertise. Because Canada has always been a vocational market, our target always included the mixed truck and off-road machinery fleet used in forestry, mining, construction, utility, municipal and agriculture. What makes this approach attractive? EVERYONE IS A POTENTIAL CUSTOMER From O/O’s, medium to large Fleets, and OE dealers. Because your parts acquisition cost is low and the in-shop job time is low, you can wholesale your service to the OE dealer and multi-line parts distributor.
Entry takes in-depth knowledge and training. General repair shops don’t have the trained specialists necessary to complete specialty repairs at a cost competitive with a shop that performs these repairs over and over again. This allows the OE dealer and general repair facilities to have the work done off-site and add mark-up. By outsourcing these specialized services, the fleet and OE dealer can free up their class A technicians for work on engines and drive trains. This has an added benefit, during this time of technician shortages, to eliminate some of the time consuming and costly work that is provided by this group of specialists. LIMITED COMPETITION Only those with the specialized knowledge and training could enter these specialized markets. Plus – training is provided by the manufacturers supplying the parts and components. A good example is in the world of filtration. As noted previously, back in 1970 I joined a small business that specialized in filtration. The business was centered on mixed fleet filter inventory management and air filter cleaning. Our sales were almost evenly split between fleet end-users, multi-line aftermarket parts distributors – and OEM dealers. In fact, over 60% of our business was to OE dealers and independent aftermarket parts distributors. We became the largest Canadian ‘single location’ distributor for the brands we carried. It’s amazing what happens when your business is recognized as ‘the expert’ in a given field. Just look at the long time Association of Diesel Engine Specialists (ADS) and how their members are viewed by the on and off-road diesel engine market. Other parts/service categories include: exhaust & emission controls, hydraulics, lighting, cooling and air conditioning. We ’ l l p r o f i l e s o m e o f t h e s e ‘Specialists’ in future columns. Next Month: A new channel: Combined product/service with hub and spoke specialized distribution.
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